Suppose that you are a currency speculator, based in the U.S., att January 1st, the spot rate for the Canadian dollar is $0.68. This is have C$160,000.00 to use on these positions. Suppose that on February 10th, the Canadian dollar depreciates (a In order to purchase C$160,000.00 in spot market, you will need $107,200.00 alize on a possible depreciation of the Canadian dollar (C$). On t which futures contracts for Canadian dollars are being sold. You $139,360.00 $128,640.00 $150,080.00 d) to $0.67 in the spot market. (U.S. dollars) for the exchange. Suppose that you are a currency speculator, based in the U.S., attempting to capitalize on a possible depreciation of the Canadian dollar (C$). On January 1st, the spot rate for the Canadian dollar is $0.68. This is also the price at which futures contracts for Canadian dollars are being sold. You have C$160,000.00 to use on these positions. Suppose that on February 10th, the Canadian dollar depreciates (as you speculated) to $0.67 in the spot market. In order to purchase C$160,000.00 in spot market, you will need (U.S. dollars) for the exchange.

Use the following information for the next 2 questions. Assume that the U.S. one-year interest rate is 8% and the one-year interest rate on Australian dollars is 13%. The U.S. annual inflation is expected to be 5%, while the Australian annual inflation is expected to be 7%. The current spot exchange rate of an Australian dollar is $0.689. You have $100,000 to invest for one year. Question 4 (6.25 points) You believe that IFE holds. What will be the yield on your investment if you invest in the Australian market? (HINT: You believe that IFE holds, so the spot rate one year later is the rate obtained from IFE. Note that the interest rate given in the problem is the nominal rate.) 13.00% 8.00% 18.23% 7.16%

Assume that the Mexican peso currently trades at 11 pesos to the U.S. dollar. During the year U.S. inflation is expected to average 4%, while Mexican inflation is expected to average 5%. What is the current value of one peso in terms of U.S. dollars? Given the relative inflation rates, what will the exchange rates be 1 year from now? Which currency is expected to appreciate and which currency is expected to depreciate over the next year? The current value of one Mexican peso in terms of U.S. dollars, USS, is US$/MP. (Round to six decimal places.) Given the relative inflation rates, the exchange rate of one U.S. dollar in terms of Mexican pesos, MP, one year from now will be MP/US$. (Round to six decimal places.) Given the relative inflation rates, the exchange rate of one Mexican peso in terms of U.S. dollars, US$, one year from now will be US$ /MP. (Round to six decimal places.) ▼is expected to appreciate, while the is expected to depreciate over the next year. (Select from the…

Required: Suppose you conduct currency carry trade by borrowing $1 million at the start of each year and investing in the New Zealand dollar for one year. One-year interest rates and the exchange rate between the U.S. dollar ($) and New Zealand dollar (NZ$) are provided below for the period 2000 - 2009. Note that interest rates are one-year interbank rates on January 1st each year, and that the exchange rate is the amount of New Zealand dollar per U.S. dollar on December 31 each year. The exchange rate was NZ$1.9108 per $ on January 1, 2000. Fill out columns (4) - (7) and compute the total dollar profits from this carry trade over the ten-year period. Also, assess the validity of uncovered interest rate parity based on your solution of this problem. You are encouraged to use the Excel spreadsheet software to tackle this problem. Note: Negative value should be entered with a minus sign. Enter profit value answers in dollars, rather than in millions of dollars. Do not round intermediate…